USDA GAIN: Livestock and Products

USDA GAIN: Russia Livestock and Products Annual 2012

Russian beef cattle inventories have grown significantly over the last three years, supported by
subsidized live cattle imports in accordance with State beef production programs. Beef consumption
remained flat due to a small decrease in beef production compared to previous years and a slight
increase in imports as a result of increased tariff-rate quota (TRQ) volumes for “high-quality” beef. A
drought in the summer of 2012 is anticipated to adversely impact the growth rate of pork production in
Russia in 2012 and 2013 because of high feed prices. Imports of live pigs, beef and pork decreased
from January through June 2012 because importers delayed purchases in order to take advantage of

Production:

Cattle and Beef

FAS/Moscow forecasts the overall Russian cattle inventory, by the end of 2012, to increase by 0.7% to 19,430,000 head. Beef cow inventories are forecast to increase in 2011 and 2012 by 45% and 24%, respectively. Live cattle imports continue to grow, supported by State subsidies for domestic beef production programs.

FAS/Moscow increased its slaughter forecast for 2012 by 0.6%, to 6.78 million head. However, beef production did not change due to slightly lower slaughter weights for cattle. Producers expedited slaughter because of feed shortages, and high prices for feed, after a drought in the summer of 2012. FAS/Moscow forecasts beef production to remain flat in 2013 as producers are expected to continue to augment their slaughter rates in the first half of the year.

Russian Government officials stated that they believe Russian production will be able to satisfy most of Russia’s beef needs by 2018-2020. To accomplish this, Russia’s Ministry of Agriculture announced it will fund 8-10 large support projects for beef production as well as dozens of medium-sized projects throughout the country. FAS/Moscow anticipates Altay, the Far East and Siberia, which have large areas of pastures, to be the focal points for the assistance.

Despite State interest in increasing Russian beef production, beef consumption remained flat due to a modest decrease in production, when compared to previous years, and a slight increase in imports as a result of increased TRQ volumes for “high-quality” beef. High-quality beef, as defined by Russia’s World Trade Organization (WTO) commitments, will be provided quota-free access at a fixed tariff rate of 15% (currently, such an exception is provided only to beef imported with a value in excess of €8/kg).

Swine and Pork

Swine Production

FAS/Moscow decreased its 2012 forecast for swine beginning stocks by 0.4% due to a slight increase in pigs slaughtered because of difficulties in supplies of affordable feed. Swine production in Russia stabilized as a result of State support and increased investments in the industry. Industrial production at agricultural establishments, at the beginning of January 2012, had increased by 9.6%, weight gain/day increased by 5.9%. Further the number of furrowed sows increased by 4.6%, the piglet crop increased by 8.8%, and the piglet crop per 100 sows increased by 7.8 percent. FAS/Moscow attributes these improved yields to improved farm management and feed, better veterinary services, and better-quality swine genetics.

Pork Production

FAS/Moscow decreased its 2012 pork production forecast by 2.7%, to 2.045 MMT, because of increased feed prices resulting from lower grain production (caused by unfavorable weather conditions throughout the world). However, year-on-year pork production is still forecast to increase to 2.045 MMT, or 2.2% more in 2012 than in 2011. Pork production in 2013 is forecast to grow by another 2.7%, to 2.1 MMT, following the renovation and construction of new swine production farms.

Livestock Production in 2012

The Federal State Statistics Service of Russia (Rosstat) reported that cattle production for slaughter at agricultural establishments decreased by 11% to 684,000 MT in 2011, when compared to 2010 (due to a reduced interest at Russian dairy farms in fattening cattle). Rosstat reported that pig production increased by 9.6% to 1.607 MMT due to improved efficiency and increased investments. The average gain-weight-per-day increased by 2.6% for cattle and 5.9% for swine, to 514 grams (1.13 pounds) and 465 grams (1.55 pounds) per day, respectively.

Cattle Inventory

Investments and activity in the dairy industry have stimulated Russian cattle production. However, production per cow has decreased slightly. Rosstat reported that the number of calved, inseminated cows and heifers (2.56 million) and the domestic calf crop (2.58 million) jointly decreased by 4.3% on agricultural establishments in 2011. FAS/Moscow forecasts decreased production per cow, from 77 calves per 100 cows in 2012 to 76 in 2013. The decreased production is attributable to a lack of professional livestock specialists which are needed to service new, modern beef and dairy farms, populated with highly productive domestic and imported cattle. Moreover, the share of cattle inventories on private household farms is also decreasing because younger farming generations are moving to towns and cities and are not staying in the business of livestock farming. Private household farms raised 46.8% of cattle by the end of June 2012 compared to 47.7% by the end of June 2011. The total number of cattle in Russia was 21.4 million head at the end of June 2012 (which includes 9.2 million head of cows (i.e., a year-on-year growth figure of 2.3%), which is a 1.3% increase from the same time period in 2011.

The Russian government ties subsidies for livestock production to the maintenance of stable livestock inventories. Dairy cattle breeders, (e.g., in the Omsk region) which suffered from drought, slaughtered their livestock to counter burgeoning feed costs. However, the Federal and local governments are now concerned that the current shortage, exacerbated by a prolonged drought in the summer of 2012, will have a significant impact on Russian milk and meat production in the near future. Given these circumstances, the Governors of these regions insist that all livestock should be saved, and that farmers should take whatever measures are available in order to maintain livestock inventories at their current levels. In turn, the Governors anticipate their regions will receive additional financial support from the Federal budget.

Beef Cattle Inventory

Business activity, coupled with the state support through subsidized credits, has stimulated development of beef cattle inventories. The number of beef cows grew by 6.4% on agricultural establishments to 193,115 head by the end of 2011 (from 181,492 head at the end of 2010).

FAS/Moscow has decreased the estimate of 2012 pork production by 2.7 % (2.045 MMT) because of increased feed prices due to lower grain production (caused by unfavorable weather conditions throughout the world). However, year-on-year pork production is still forecast to increase to 2.045 MMT (or 2.2% more than in 2011). Pork production in 2013 is forecast to increase by 2.7%, to 2.1 MMT, when compared to 2012. Although Russian agricultural establishments report growth in pork production (i.e., 1.607 MMT in 2011, compared to 1.466 MMT in 2010), the actual production figure is much lower because small producers -- private household farms and private farms in many regions were infected with African Swine Fever (ASF) -- have been forced to close their swine production business. As a result, private household farms raised only 30.4% of Russia’s swine, at the end of June 2012 (they accounted for 34.5% at the end of June 2011). According to Rosstat, all of Russia’s swine farms held 17.3 million head at the end of December 2011, 0.7% more than in 2010. At the end of June 2012, all Russian swine producers had raised 19.3 million head of swine during the first six months of the year, a 3.7% increase when compared to the same time period in 2011.

As is the case this year, FAS/Moscow anticipates that 2013 production figures will also be negatively influenced by the 2012 global grain situation.

Consumption:

According to Rossatat, Russia has increased its consumption of meat and poultry products in 2012, to 69 kilogram, compared to 67 kilograms in 2009. The combination of Russian pork production and import growth has led to increased consumption of pork in Russia (i.e., from 21.0 kg per capita in 2011 {46.30 pounds/capita}, to 21.4 kg per capita in 2012 {47.12 pounds/capita}, to an estimated 22.1 kgs per capita in 2013 {48.72 pounds/capita}).

Imports of beef decreased by 6.6% from January-June 2012 to 275.506 MMT, when compared to the same period in 2011. During the same period, pork imports increased by 2.9% (to 395,186 MT), and poultry imports increased by 16.0% to 240,882 MT.

Trade:

Pork imports in 2012 are forecasts by FAS/Moscow to grow by 5.5%, due to increased imports from Belarus (which uses its privilege as a member of the Customs Union {CU} to export duty free products to Russia).

FAS/Moscow forecasts beef imports to remain stable in 2012, due to increased imports from Belarus. Increased imports from Belarus are expected to offset decreased imports from Europe and the United States during the first half of 2012.

Russian cattle imports were up 18% in the first half of 2012 when compared to the first half of 2011 (when there were problems with vessel availability for cattle transportation). However, FAS/Moscow forecasts cattle imports to grow by 5% during calendar year 2012.

Swine imports to Russia decreased from 1.2 million head in 2009 to 669,000 head in 2011 as a result of a higher import duty which grew from 5% in 2009 to 40% in 2010. Russian imports of live swine decreased 52% in the first half of 2012, compared to the same period of 2011, because importers delayed purchases in order to take advantage of lower duties that will be applied in the second half of 2012 after Russia acceded to the WTO. The bulk of imports are expected to originate from Estonia, Denmark, Latvia and Germany. Belarus exported 109,000 head of swine to Russia in 2011. January-June 2012 swine imports from all countries (excluding Belarusian imports of 43,000 head) were 180,000 head (compared to 383,000 head during the same period in 2011). The Russian Union of Pork Producers believes that the new 5% duty on live pigs will significantly increase swine imports resulting in injury to the domestic industry. The Union has estimated that as many as one million of pigs will be imported into Russian in 2013.

Trade Policy

In February of 2012, the Russian Government stated that Russia needs to protect the domestic market against cheap imports of high-quality beef after Russia's accedes to the World Trade Organization (WTO). To do so, the Government announced its intention to develop a revised definition for “high-quality beef” that focuses on quality rather than price. High-quality beef, as defined by Russia’s WTO commitments, will be provided quota-free access at a fixed tariff rate of 15% ad velorem (currently, such an exception is provided only to beef imported with a value in excess of €8/kg). The Ministry of Agriculture was tasked with developing a national standard for high quality beef. The Russian Meat Processing Institute (RMPI) began working with the Ministry on this definition and, according to RMPI, will define “high quality beef” as chilled, not frozen. This definition, if put into effect, would potentially limit imports of these products.

In addition, the Ministry of Agriculture, in conjunection with the National Meat Unions, has been tasked with developing additional stimulus packages for pork production facilities to help modernize old facilities, and construct new establishments for the slaughter and processing of two million head per facility. It is anticipated that in December of 2012, the Ministry will develop a branch program called the “Development of pork production in Russia for a period of 2013-2015,” as well as a concept for the “Development of pork production in Russia for a period until 2020.” Currently the Russian swine industry is monitoring how WTO obligations may influence the competitiveness of their pork production and processing. The swine producers and processors have indicated they stand ready to request protective measures from the Government, if necessary, including the application of higher duties on live pigs.

Russian Pork producers are also worried about continued outbreaks of ASF which is spreading across Russia. According to VPSS there have been more than 20 reported outbreaks between January-July of 2012. In turn, VPSS reportedly developing a national program for the eradication of ASF.